Blue chips manage gains

GM, retailers support Dow, S&P 500 as investors gear up for Wednesday's consumer price report.

June 14, 2005: 5:17 PM EDT

NEW YORK (CNN/Money) - Automakers and retailers lifted the blue-chip averages Tuesday, but any advance was limited ahead of Wednesday's key economic news, including the government's May consumer price report.

The Dow Jones industrial average (up 25.01 to 10,547.57, Charts) and the Standard & Poor's 500 (up 3.09 to 1,203.91, Charts) index each added more than 0.2 percent.

The Nasdaq composite (up 0.08 to 2,069.04, Charts) ended little changed, with weakness in the influential chip sector keeping it from gaining with the broader market.

General Motors (up $1.42 to $35.87, Research), a Dow component, rose 4.1 percent on a report in the Detroit News that said GM told the local union that it needed to reach an agreement to cut health care costs by the end of the month, or it may take unilateral action.

Rival Ford Motor (up $0.30 to $10.82, Research) also rose 3 percent on the news, while auto parts supplier Delphi Corp. (up $0.45 to $5.06, Research) jumped 9.8 percent after being upgraded to "hold" from "sell" by Deutsche Securities.

"I think the market is responding pretty well to the reports and also positioning itself ahead of the economic news due later in the week," said Peter Cardillo, chief market analyst at S.W. Bach & Co.

Morning reports showed a bigger-than-expected drop in retail sales in May, and a larger-than-expected drop in the Producer Price Index last month.

But there were some positive signs in the morning's retail sales report for automakers and general merchandise chains such as Wal-Mart Stores (up $1.40 to $49.68, Research), the world's largest retailer, said Stephen Stanley, chief economist at RBS Greenwich Capital.

In addition, April retail sales numbers were revised higher, and June's report looks to be stronger than the one for May, he noted.

Best Buy (up $8.68 to $67.80, Research), the electronics retailer, reported earnings Tuesday morning of 51 cents a share, versus 28 cents a year earlier, well above estimates, sending shares up 14.7 percent.

Wal-Mart and Best Buy led a list of stock gainers in the sector, sending the S&P Retail (up $8.35 to $449.96, Research) index up 1.6 percent.

Wednesday brings a slew of potentially market-moving economic news, including the May Consumer Price Index (CPI). CPI is expected to have risen 0.1 percent after rising 0.5 percent in April. The "core" CPI is expected to have risen 0.2 percent in May after an unchanged reading in April.

The CPI number could show something similar to the PPI, in that it's bound to be influenced by the drop in energy prices during the period.

"But certainly the market should be focused on the core number, since that's what the Fed looks at," Stanley added. "We're looking for an 0.2 percent increase, which wouldn't cause a big reaction in the market."

On the move
Among other issues, Altria (down $1.37 to $66.95, Research) lost 2 percent, weighing on the Dow, amid a setback on the appeal of a $10.1 billion verdict against the company's Philip Morris unit regarding "light" cigarettes. The case was not on the court's newly announced schedule for the week, increasing the likelihood it might not be heard until the fall, Reuters reported.

Boeing (down $1.70 to $62.93, Research) shares lost 2.6 percent as the company and rival Airbus both announced new orders at the Paris Air Show.

Boeing announced a number of big orders, worth at least $6.8 billion, according to the Wall Street Journal. However, "they have a tendency not to store up orders to announce at the Air Show, whereas Airbus likes to make more of a splash there," said J.B. Groh, a research analyst at D.A. Davidson who covers the stock.

Wall Street firm Lehman Brothers (up $3.00 to $96.05, Research) reported earnings of $2.26 a share, 3 cents above average forecasts and up from $2.01 a year ago. It is the first of three Wall Street banks reporting this week. Shares rose more than 3 percent.

In merger news, BNP Paribas' unit BancWest said it will buy U.S. bank Commercial Federal (up $8.01 to $33.95, Research) for $1.36 billion in cash. Commercial Federal shares jumped nearly 31 percent.

Market breadth was positive. On the New York Stock Exchange, winners topped losers five to three on volume of 1.32 billion shares. On the Nasdaq, advancers beat decliners by four to three as 1.43 billion shares traded hands.

PPI, retail sales dip
The May Producer Price Index (PPI) fell 0.6 percent, due to the biggest drop in oil prices in two years, after climbing 0.6 percent in April. Economists surveyed by Briefing.com thought PPI would decline 0.2 percent in the month. The so-called "core" PPI, which excludes volatile food and energy prices, increased 0.1 percent in May.

May retail sales slipped 0.5 percent last month, after growing an upwardly revised 1.5 percent in April. Economists expected sales to retreat 0.2 percent.

The two reports seemed to indicate both that inflation is well contained, and that growth is slowing moderately, an environment that could allow the Fed to wind down its rate-hiking campaign sooner rather than later.

U.S. light crude for July delivery fell 62 cents to settle at $55 a barrel on the New York Mercantile Exchange.

The Organization of Petroleum Exporting Countries (OPEC) will meet Wednesday to discuss output policy. The cartel is expected to raise its official ceiling by 500,000 barrels per day (bpd) to 28 million bpd, but members are already pumping at or near that higher level anyway.

Treasury prices fell, pushing the yield on the 10-year note up to 4.11 percent from 4.09 percent late Monday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar gained versus the euro and was little changed versus the yen.

COMEX gold fell $1.80 to settle at $429.30 an ounce